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Chapter - 8
INDONESIA

1.    SIGNIFICANCE OF PUBLIC WORKS

1.1.    In Indonesia, public works cover a very large area of activities. According to the Department of Traffic, Roads, Buildings and Irrigation, established by a decree of the Governor General of the Dutch East Indies dated 22 December 1933, its tasks and functions include:

1. matters relating to road, sea and air traffic
2. construction, utilisation and maintenance of infrastructure, Le. harbours, certain public buildings and roads, power plants, irrigation, drainage and water supplies facilities
3. post, telegraph and telephone services
4. management of certain rivers, waterways, lakes and ponds
5. affairs of government relating to the development of maj or mining undertakings.

1.2.    From what has been mentioned earlier, it may be concluded that the scope of activities covered by public works in the past as well as abroad has been quite extensive in comparison to its present coverage. Currently, many areas of public works as already mentioned are being dealt with by other departments, such as the Department of Communications, Department of Agriculture, Department of Internal Affairs or by regional and local governments.

1.3.    Over the years, the tasks carried out by the Department of Public Works have varied, mainly due to changes in the state organisation in general and in the organisation of the Public Works Department itself. Even so, these changes did not cause public works administration to fail to develop according to well-planned patterns.

2.    CHARACTERISTICS OF PUBLIC WORKS

The technical products of public works usually require major financial outlays. How large the associated costs are can be seen from the budgets allocated to the Public Works Department, which exceeds those of other departments. Public works and projects are non-profit undertakings constructed in the public interest. However, should they prove revenue-producing, their administration cannot be carried out in a purely commercial manner, since non-commercial factors need also to be considered. Consequently, public works projects are normally categorised as projects providing a slow return on investments.

3.    PRINCIPAL TASKS OF THE DEPARTMENT OF PUBLIC WORKS

3.1.    Based on the Presidential Decree of 1971 on the Principles of Organisation and the Presidential Decree of 1981 on Organisational Structure of Departments, the principal tasks of the Indonesian Department of Public Works is to carry out the general tasks of government and development, which may be classified according to the following tasks and functions, viz. regulating, guiding, developing and supervising.

3.2.    In its relation to the development execution, the field of public works maintains the role of supplying the means and infrastructure for public works, viz. water resources development, highways and human settlements.

3.3.    Corresponding to the principal tasks and functions mentioned above, the Minister of Public Works, assisted by the Secretary General, the Directors General and the Head of the Research and Development Office has the task of regulating, guiding, developing and supervising the means and infrastructure in the field of public works. Regulating implies consolidating the fulfilment of the rights and responsibilities of the agents of development and government, in addition to those who benefit from the development. Guiding implies promoting the capability of the agents of government and development and of those who benefit from the development effort. Development implies efforts which directly produce results in the form of means and infrastructure related to planning, development execution, management, utilisation and maintenance. Supervising implies oversight of the agents of government and development, in addition to those who benefit from the development outcomes, in order to achieve compliance with relevant laws, regulations, policies, guidelines and standards.

The long-term development plan in the field of public works has its foundation in the general pattern and long term goals set out in the Outlines of State Policy. Development in the public works area is mainly concerned with the supply and maintenance of physical infrastructure. Accordingly, the long-term development plan for public works is divided into Five-Year Plan and Annual Programmes, on the basis of following policies:

1. The development pattern approach of the supply and management of the physical infrastructure for meeting the demand of the public and to support other sectors, in harmony with the sectors outlined in the development plan on a national as well as regional level
2. The development of various potential regions for their existing resources (human and natural, factors of production and technology) which may be utilised by various agencies in dealing with activities in the respective regions
3. The sectoral approach pattern based on observations of achievements under the macro level
4. The regional approach pattern based on observations of the potential development of resources and environmental conditions in various regions.
5. The national development policies which are founded on the :

* prompt and even distribution of development and its results in order to achieve social justice for the Indonesian People, observing problems of social instability, poverty, critical issues, geographic isolation, urban slums and border areas.

* stimulation of economic growth and regional development of strategic sectors and areas, new and potential areas and regions with major economic potential.

* growth of national stability, observing areas and regions of political instability, insecurity and a relatively high degree of social imbalance.

4.2.    In preparing the implementation regulations, each directorate general at the Department of Public Works combines the above development planning patterns to provide directives to their respective agencies.

4.3.    In order to implement its Annual Programme, the Department of Public Works gathers information on routine and development expenditures required by the department to carry out its tasks in the coming budget year. To achieve the objectives set out in the broad outlines of state policy, the development pattern and inter-sectoral links are rationalised.

4.4.    Each regional office of the Department of Public Works occupies a strategic position and exercises a decisive role in the successful outcome of programmes, as regional offices are the only working units operating in the regions. Therefore the regional offices are expected to prepare development programmes for public works infrastructure and means which reflects harmony and unity between the interests of the central government and those of the regions, as well as inter-sectoral harmony in the respective regions.

5.    BUDGETING AND FINANCING OF PROJECTS

5.1.    As noted previously public works in Indonesia are not carried out exclusively by the Department of Public Works, but may be undertaken by other departments, government agencies and state institutions. This can be seen in the construction of public buildings and highways in the provinces, carried out with the help of foreign aid.

5.2.    Development projects within the Department of Public Works are carried out in stages in accordance with the national development programme detailed in the outlines of state policy, viz. the long-term development plan, the medium-term development plan and the public works budgets of the annual development programme of the respective departments. These projects are not only financed by national funds, but also by foreign aid, either in the form of grants or foreign loans.

5.3.    National development funds are obtained from the budget mobilised by the central government Upon the approval of the National Development Planning Board, these funds may be used to finance national development projects. National funds may also be obtained from funds of the regional budget mobilised by the regional governments as autonomous bodies. With the approval of the regional House of People's Representatives (Parliament) and that of the Regional Development Planning Board, these funds may be used to finance regional development projects or those not financed by national projects.

5.4.    Projects financed by foreign aid are required partly to use funds from the state or regional budgets as subsidiary sources of financing. Central government projects managed by departments, government agencies and state institutions are all included in the Projects Schedule, whereas regional projects are included in the Regional Projects Schedule, while the funds generated by foreign aid are already included in the Projects Schedules of the respective departments, government agencies and state institutions.

5.5.    The budgeting and financing process of a project starts with the drafting of the project proposal made on the basis of a feasibility study conducted by the Public Works Department after considering aspects of technical execution, economy and finance, readiness of execution, capability in furnishing subsidiary funds and other aspects closely related to the implementation of the particular project such as utilisation, environment, manpower and efforts to promote the use of domestic products.

5.6.    The project proposals prepared by the Directorate for project guidance at each Directorate General or other units of the Department of Public Works are subsequently collected and evaluated by the Planning Bureau of the Secretariat General of the Department of Public Works. The project proposals are then transmitted to the National Development Planning Board for approval and their subsequent presentation to the government. In the case of projects dependent on foreign aid, the process of preparing the documents coftcerning the foreign aid agreement (foreign loans as well as grants) has to be confirmed by the Foreign Aid Co-operation Bureau of the Public Works Department.

5.7.    Having received the approval of the National Development Planning Board and after the funds originating from foreign aid have been approved by both parties in the form of a loan or grant agreement, the project proposals of the Department are transmitted to the Department of Finance to be included in the budget proposal for approval by Parliament in the Budget Act. After enactment, the Budget Act is issued by the Department of Finance to each department in the form of Project Schedules to be used as a reference for their implementation.

5.8.    A similar budgeting and financing system or process applies to the finalising of the Regional Projects Schedule. The difference lies only in the fact that it concerns a lower level of government with a different scope of activities. Foreign aid received by projects within the Department of Public Works are generally in the form of loans or grants, normally provided by the World Bank/IBRD, Asian Development Bank (ADB), Japanese Overseas Economic Fund (OECF), Japan International Co-operation Fund (JICA), CGI and others.

6.    SUBMISSION AND APPROVAL OF PUBLIC WORKS AND PROJECTS

Basically there are three main criteria for the evaluation of projects submitted for approval.

6.1.    Capital Investment by the Government

Proposed projects funded by foreign aid in addition to grants are given higher priority over other projects within the Department of Public Works, on the basis of aspects such as :

1. Technical aspects based on construction standards specified on a national as well as limited scale by the Public Works Department. In addition, priority is also given to projects which can function immediately, whether a section or the entire part is for the benefit of the general public.
2. Economic and financial aspects based on the benefit provided by the project in supporting strategic development sectors for both the promotion of national economy as well as the capability of the project to generate indirect revenues for the financing of utilisation, maintenance and the development of project investments.
3. Timing aspects involving the degree of readiness based on the level of preparations being carried out of feasibility studies and engineering as well as readiness in the implementation of the project, including the provision of land and other facilities, organisation and management, availability of manpower to meet both technical and administrative requirements, provision of competent contractors and positive support from the local government and public.
4. Aspect of capability in providing subsidiary funds to finance part of the work contract, the procurement of land, taxes and project administration, based on the availability of national funds and an estimate of the funds required for the next budget year.
5. Aspect of efforts to promote the use of domestic products and services, reflected since the completion of the engineering study by preparing work packages in accordance with capability level of consulting services and construction services and also the production of domestic goods or services by observing the existing technical standards.

A feasibility study is an activity conducted for the purpose of testing and studying aspects related to the production of desired means or infrastructure in accordance with stated objectives, by observing the environmental structure, geographical situation, social condition and stability in the surrounding community. The aspects normally tested and studied during feasibility studies relate to the production of means or infrastructure comprising the :

1. technical execution aspect
2. administrative execution aspect
3. exploitation aspect in the interest of national development
4. benefit for the surrounding communities aspect
5. impact aspect on the environment
6. impact aspect on and the benefit aspect for, development patterns of other sectors.

The feasibility study includes the design of each activity, so that the cost and benefit ratio may be calculated. Also included is an economic analysis of the project as the basis for decision-making by the government in carrying out development projects.

6.3.1.    The implementation of public works and development projects carried out in Indonesia cover various aspects and sectors connected with public works, including development activities both national and regional in nature. Ideally, the implementation of these activities should be carried out centrally by the Department of Public Works or their implementation should at least be carried out under the supervision and control of the Department of Public Works. In fact, because the very limited human resources owned by the Department of Public Works and also political considerations which brought about changes in the duties and functions of state organisations, pursuant to the Presidential Decree Nr 15 Of 1984 concerning the organisational structure of Departments, the responsibility of the Department of Public Works is limited to that of regulating, guiding, developing and supervising certain fields of development activities.

6.3.2.    The duties and functions related to the implementation of public works activities and other development projects of a less specific nature are delegated to other ministries under technical guidance of or in co-operation with the Department of Public Works. These duties and functions include, financial means for the development of Level I Regions conducted by the Department of Interior with funds from the Regional Budget and the construction of public buildings carried out by other ministries using funds from their respective budgets. Public Works activities and development projects carried out by the Department of Public Works cover all development activities in the whole of Indonesia. The Department of Public Works therefore arranges and plans a development strategy which involves delegation of a part of its development duties and functions to regional offices located in the various provinces.

6.3.3.    In view of the above aspects, in carrying out its activities and development projects, the Department of Public Works implements its development strategy in the following manner:-

1. centralisation under the supervision and guidance of the directors of the respective Directorate General of the Department of Public Works
2. by way of decentralisation under supervision and guidance of the heads of the regional public works offices in the respective provinces
3. by way of centralisation under direct supervision and guidance of the Department of Public Works.

6.3.4.    In addition to the implementation stage, the delegation of authority is also carried out in the maintenance stage and in the utilisation of finished public works and projects. Maintenance of finished projects carried out by departments outside the Department of Public Works is also conducted by the respective ministries in accordance with their departmental rules and procedures.

6.3.5.    The maintenance, operation and utilisation of development projects carried out by the Department of Public Works are conducted in the following manner:

1. Finished projects, which become part of the state inventory and are in custody of the departments, are maintained, operated and utilised by the respective units of the Department of Public Works.
2. With respect to public utilities, the authority to maintain, operate and utilise these facilities is specified as follows :

1. If the work has been completed, but may still require specific maintenance work as well as substantial funding beyond the resources of the regional government concerned, relevant working units of the Department of Public Works provide the required services.
2. If the work has been completed and is functioning properly with the particular regional government capable of dealing with the job, the local government concerned provides the required services.

7.1.    Development activities in the field of public works are additional to those being carried out by the Department of Public Works for its own purposes. These additional development activities are also conducted in co-operation with other departments and instrumentalities at both central and regional levels together with their respective agencies, as well as the working units of the central government stationed in the provinces.

These projects may be grouped in several sectors, viz.:

1. communication and tourism
2. agriculture and water supply development
3. low-cost housing and human settlements
4. urban, rural and regional development.

7.1.2.    The sectors mentioned above are in turn divided into the following sub-sectors, viz.:

1. road infrastructure
2. water supply development
3. low-cost housing and human settlements
4. urban, rural and regional development.

7.2.    Projects Financed by Foreign Aid

Involvement of the donor agency or country is quite substantial. This can be seen from the preparations to secure foreign aid until the final decision as to which party has won the tender. Before the donor agency or country approves the loan, the project proposal is examined and evaluated from various aspects in order to find out whether the project is feasible. The evaluation is conducted by experts from the donor agency or country representing various disciplines.

The involvement of the donor agency or country in the tender process is in approving documents of tender, also for direct assignments for tender execution. The outcome of the tender must also be approved by the donor agency or country in order to obtain the "No Objection Letter" (NOL). Subsequent to the issuing of the NOL the result of the tender is submitted for approval in accordance with the contract value (Presidential Instruction Nr 1/88).

On the completion of a project financed by foreign aid, an accountability report is prepared containing an evaluation of all activities and results completed. The objectives of this report are to serve as a means :

1. to facilitate project implementation
2. to improve the quality of banking operations
3. to promote the effectiveness of development activities.

Accordingly, the report contains the following :

1. factual and comprehensive information concerning objectives, plans, implementation and direct or indirect impact of the project
2. recommendations to maximise the benefits of the project
3. analysis and evaluation to meet future requirement and target improvements.

Material needed for the preparation of this report are also obtained from sources such as the Project Officer, Directorate of Programme Guidance, corresponding directorates and donor agency or country.

7.2.3.    Public Enterprises as Contractor

In order to carry out their functions government departments may find it necessary to establish public enterprises with capital provided by the government as separate assets. These public enterprises come in three types based on their status, viz. subsidised, half-subsidised and limited company. Public enterprises as such are not entirely profit-oriented, as they are intended to serve the general public. The Department of Public Works owns a number of public enterprises incorporated as limited companies with the task of assisting the department to carry out its tasks.

Public contractors within the Department of Public Works have the technical expertise required to support the activities of the department. The technical expertise cover the survey and investigation services, consulting services, construction services, supervising services and industrial products services.

The capital which flows to the public enterprises by the so-called "government's participation funds" are managed separately from the national and regional budgets. In this way public enterprises obtain original capital or additional capital from the government. Co-operation with outside parties to expand business or to increase capital must have the approval of the Minister of Finance. This is also the case for write-offs or liquidations.

During tender of public works and projects at the Department of Public Works, public enterprises do not receive any special treatment, so that they must compete with private enterprises. Accordingly, public enterprises have the opportunity to promote their professionalism and thus increase their chances of securing public works and projects.

The organisational structure of projects within the Department of Public Works comprises elements such as management, management assitance and executive management. The management element constitutes the Project Manager, while management assistance elements are aided by the heads of the sections concerned. Division heads constitute the executive element assisted by field supervisors and the project treasurer. The structure and work organisation of a project, of which the project officer superior is a director, is determined by the Director General, whereas the structure and work organisation of a project of which the project officer superior is the head of a district public works office, is determined by the head of the regional public works office.

Projects are undertaken in stages and proper sequence, starting with the planning stage, followed by the technical preparation and physical construction stages and finally the utilisation stage.

In order to produce a suitable detail design, it may be necessary to involve various disciplines in the following order:

(i) preliminary stage comprising agreement and approval

(ii) design construction stage comprising the drawing of a master plan and preparation of plans

(iii) preparation of tender documents stage comprising the drawing-up of detailed plans and completion of tender documents.

Although all these stages have activities which differ from each other, they are interrelated, mutually supporting and constitute a follow-up of previous activities. Since the detail design constitutes the principal input in the preparation of tender documents, the preparation process is properly controlled in accordance with existing laws and regulations.

7.2 A3.    Preparing the Tender Documents

The completion of the detail design and bills of quantities are followed by the preparation of tender documents covering the general terms of contract, technical specifications and material, bills of quantities and detail design.

The tender documents inform bidding contractors of the terms and scope of the work being tendered, enabling contractors to make bids in accordance with the standards specified in the tender documents. The preparation of tender documents is normally contracted out to technical consultants and planners from the various disciplines involved. However, the Department of Public Works does not entrust all such work to technical consultants. The Directorates for Programme Guidance at each directorate general prepare standards for planning to be used as reference by technical consultants.

The contracting out of work may be carried out through direct assignment or by limited or open tender. In the Department of Public Works, the contracting out of work is usually done by limited tender. The tender is conducted by a working team, referred to as the Tender Committee, established by the Project Officer or Project Division Head, which has not less than five members, comprising planning, financing, executing, supplying and other elements.

Before conducting the tender, the Project Officer or Project Division Head prepares a list of selected contractors in his jurisdiction. These are subjected to a prequalification process, so that only those who meet the required qualifications may take part in the tender.

In general there are three ways of preparing the list of selected contractors, viz.:

1. Using the list of qualified contractors (LQC) issued by the governor of a province from a prequalification process.
2. Using prequalification of tenderers for special projects with the value of more than Rp. 500,000,000 financed by foreign aid. Besides using the LQC issued by the governor of the particular province as the basis for prequalification, the Project Officer or Project Division Head may also conduct his own prequalification with the guidelines provided by the donor agency or country and regulations issued by the Department of Public Works.
3. Using the result of prequaUfications conducted by the respective directorate general of the Department of Public Works, the LQC shows the limits of capability of each contractor in handling a project, which is referred to as the Real Remaining Capability (RRC), only those contractors having an RRC are invited to take part in the tender.

In order to find out the RRC of contractors, each time a tender is to be held, the tender committee checks the contractor's RRC on the LQC by function and category in accordance with the requirements of the project to be tendered. The RRC check, referred to as the RRC prequalification, produces a List of Selected Contractors (LSC). Contractors whose name appear on the LSC will subsequently be invited to take part in the tender. After the letters containing the various bids have been opened, only those bids considered valid are subjected to evaluation, along the following lines :

To ascertain whether bids are meeting the administrative requirements set out in the tender documents concerning:

1. total effective period and the agency issuing the bid guarantee
2. effective time of the bid
3. conditional bid
4. effective time of the document showing that financial requirements have been met.

To ascertain whether bids are meeting the technical requirements set out in the tender documents concerning:

1. arithmetic correctness
2. implementation method
3. implementation schedule
4. equipment to be used
5. analysis of technical specifications
6. key personnel
7. part of the work to be sub-contracted.

Carried out on bids with corrected bid values as follows :

1. corrected bids with values exceeding the Owner's Estimate (OE) are not subjected to evaluation
2. corrected bids with values ranging from 80% to 100% of OE, evaluation is carried out only on unrealistic main work unit prices
3. corrected bids with values less than 80% of OE, evaluation is carried out on not more than three basic unit prices which greatly effect main types of work :

• If the average basic unit price of not more than three basic unit prices equalling or exceeding 80% of OE, the bid is considered to have met the requirements (not rejected).
• If the average basic unit price of not more than three basic unit prices is valued at less than 80% of OE, the matter will be clarified by means of comparing the manufacturer's basic unit price and local basic unit price, with the following results:

• the bid has met the requirements (not rejected).
• the bid has failed to meet the requirements (rejected).

Although the tender is based on unit prices, there are still other types of work determined on lump sum unit prices also subjected to evaluation.

After completion of the project, an examination is conducted of the quality, quantity and functioning of the finished construction. If the examination is favourable, a report is prepared followed by the initial delivery of the work (Professional Handover). After the work has been properly maintained and the maintenance period is over, the second delivery of the work (Final Handover) is carried out.

If the project has been completed and delivered by the contractor to the project officer, the latter is obliged to deliver the project to the proper authority, which in the case of public works and projects such as roads and bridges are to be delivered to the Provincial Public Works Highways Agency and, in the case of Water Supply Development, to the Provincial Water Supply Development Office. Following the delivery of work by the project officer to the agencies concerned, the subsequent maintenance cost is borne by the respective public works agencies or offices.

e.    Supervision

Supervision is carried out by the Project Management or Project Officer in accordance with specifications in the contract. Supervision covers examining the quality of material and products, working methods, contractor's quality control system and providing early advice to the contractor. The process of supervision is properly documented in order to facilitate the settlement of future problems and claims.

Supervision in the field is carried out by field supervisors as assistants of the project officer involved, whereas responsibility for testing the quality of projects rests not only with the contractor, but also with the supervising consultant. Control over projects is also conducted through weekly or monthly field meetings. The main aims of such routine meetings are to record events, discuss problems,check future work programmes and convey necessary information.

Quality control aims at ensuring that the completed work has met the terms and designs planned and that material and workmanship are of adequate standard for the work to be conducted satisfactorily within the desired time limit. Accordingly, regular inspection and testing constitute a means of avoiding unacceptable results caused by poor workmanship, changes of the source of material or material of poor quality, inappropriate or inadequate equipment and conditions detrimental to field work.

o.    General Responsibilities

As work has to be carried out in accordance with design drawings and project specifications, supervision includes checking:

1. contract documents
2. work schedule
3. accuracy in marking boundaries of the project
4. determination of location, line and elevation
5. proper slope and inclination of constructions
6. proper dimensions and elevation of constructions
7. compatibility of production units and equipment
8. source of material.

Supervision also covers the administration of field organisation and management of work in accordance with the terms prescribed for special projects and measuring and approving work that has been completed.

Quality control is necessary to ensure that the proposed material complies with specifications. The material is inspected and tested before being used.

o    Workmanship Quality Control

Quality control of workmanship and its execution are necessary to ensure that completed work meets prescribed standards of construction. This requires the inspection and testing of all work done. Workmanship quality control requires continuous supervision during progress of work.

If a project has been fully or partly completed, the Project Officer hands over the completed work together with all its assets to the relevant department, accompanied by an official report. Copies of the official report are submitted to the Inspector General, Director General for the Budget, Director General for Domestic Monetary Affairs and the State Treasury Office. The Minister for Public Works determines the temporary status of the completed work as well as their assets. In the first quarter of each budget year, the Minister informs the Minister of Finance and Chairman of the National Development Planning Board of work which during the past budget year has been completed, so that their status may be determined further. Departments, regional governments and other agencies appointed as managers of the finished projects are required to provide their operational and maintenance funds from their own budgets.

7.2.6.    Supply of Construction Machinery, Equipment and Construction Material

o    Supply of Construction Machinery and Equipment

The success of public works development projects has been due largely to the proper supply of construction machinery and equipment, especially heavy equipment. The associated problems not only involve high cost and limited usefulness, but also maintenance requiring skilled technicians and funding.

Ownership of construction machinery and equipment constitutes a considerable business risk. Therefore most contractors do not own their own machinery and equipment, but the department of Public Works is an exception.

o    Supply of Construction Material

To meet development demands, the Department of Public Works needs sufficient construction material which may be obtained directly from their own sources such as water, sand, stones, gravel, as well as finished construction material such as cement, bricks, wood, iron and asphalt.

Much of the construction material obtained from their own sources are either controlled by the regional governments or the public. The department must be able to obtain such material easily for its projects and this must be recognised by regional governments which own the sources of the construction material.

7.2.7.    Construction of Public Buildings

The joint circular of the National Development Planning Board and the Department of Finance dated April 1,1993 regulates the construction of public buildings by departments, government agencies and state institutions financed by the 1993/1994 state budget, covering new and continued construction, rehabilitation, renovation and restoration of buildings. For its implementation, the Directorate General for Human Settlements of the Public Works Department issued Guidelines for the Construction of Public Buildings for the 1993/1994 budget year which categorise the construction of public buildings :

7.2.7.1.    Construction of Public Buildings within the Department of Public Works

a.    Control at Programme Level:

1. Control of programme at policy level of national scope is conducted by first level officials within the Department of Public Works.
2. Control of programme at operational level of national scope is conducted by first level officials within the Department of Public Works.
3. Control of programmes at policy level of provincial scope is conducted by the Regional Office of the Department of Public Works.

b.    Control at Project Level:

1. Control of projects at policy level of provincial scope is exercised by the regional head of the Human Settlements Agency or the head of the district Human Settlements Office with the exception of the Special Region of the capital city, Jakarta, which is conducted by the Directorate of Building Management, Directorate General of Human Settlements, Department of Public Works.
2. Control of building construction at operational level of provincial scope is exercisedby the Project Officer.
3. Control of building construction at operational level of districts and municipalities is exercised by the Project Officer or Sub-Project Officer, provided with technical assistance from elements of the Regional Human Settlements Agencies or in the case of the Special Region of Jakarta, from the Directorate of Building Management.

The construction of public buildings by the Department of Public Works comprises control and execution during preparatory, planning, construction, delivery and utilisation stages, including the rehabilitation, renovation, restoration as well as the write-off stage of buildings. The utilisation stage covers also activities to obtain status and registration as public buildings conducted through the Secretary General of the Department of Public Works to the Directorate for Building Administration, Directorate General of Human Settlements, Department of Public Works.

The construction of structures such as junior and senior high schools and also public hospitals, are entrusted to the Department of Public Works.

1. Control of programmes at policy level of national scope is exercised by the Directorate General of Human Settlements of the Department of Public Works together with the Director General of the corresponding department who has the custody of the budget.
2. Control of programmes at operational level of national scope is exercised by the Directorate of Building Administration Directorate General of Human Settlements, Department of Public Works.
3. Control of programmes at policy level of provincial scope is exercised by the respective Regional Offices of the Department of Public Works.

1. Control of projects at policy level of provincial scope is exercised by the regional head of the Human Settlements Office or Head of the District Human Settlements Agency and in the case of the Special Region of Jakarta, by the Director for Housing Administration, Directorate General of Human Settlements, Department of Public Works.
2. Control of projects at operational level of provincial scope is exercised by the Project Officer.
3. Control of activities at operational level of districts and municipalities is exercised by the Project Officer or Sub-project Officer.

The activities of the Department of Public Works comprise control and execution during preparatory planning, construction, delivery, initial operational stages, covering registration and utilisation including maintenance (rehabilitation, renovation, restoration) of the buildings.

Activities to obtain the status of utilisation of the buildings from the department or institution concerned as the owner of such public buildings and their registration from the Directorate for Housing Administration, are carried out by the Department of Education and Culture concerning junior and senior high schools and by the Department of Health in the case of public hospitals, with the assistance of the Department of Public Works.

7.2.7.3.    Construction of Public Buildings Carried Out with Technical Aid from the Department of Public Works

The aid provided by the Department of Public Works comprises control and execution during the preparatory planning and drafting stages, the construction stage including delivery of work, the utilisation stage, viz. maintenance activities (rehabilitation, renovation, restoration) as well as the write-off of the buildings.

Control is exercised by the Departments or institutions responsible for the respective budget items and is implemented by first ranking officials and immediate superiors or project officers of the departments and institutions concerned with the assistance of the Directorate General of Human Settlements, subject to the following conditions :

1. Control of programmes at policy level of national scope is exercised by first ranking officials responsible as programme cultivator.
2. Control of projects at policy level of provincial scope is exercised by the immediate superior of the project officer acting as the assistant of the immediate superior of the first ranking officials concerned.
3. Control of projects at policy level of provincial scope is also exercised by the Direc tor General of Human Settlements who provides technical aid in the form of financial means or information, the implementation of which is carried out by regional Human Settlements Office elements in the regions and by the Director for Housing Administra tion where the project is located in the Special Region of Jakarta. With respect to projects at central government level, the implementation of technical aid is carried out in consul tation with the Director for Housing Administration.

8.    PROJECT IMPLEMENTATION CONTROL

The three principal sources of development funds are government savings, public savings and funds from abroad. The development budget is divided into sectors, sub-sectors, programmes and-projects. Ministers, agency heads and heads of institutions are responsible, from both financial and physical view points, for their respective projects which form part of a programme. The persons responsible for providing executive guidance to programmes or projects within an organisation are first-tier officials. Those who are responsible for day-to-day activities of project implementation within the organisation are second-tier officials.

To implement the development budget, the respective department, agency or institution fills out the Project Schedule (PS) for each project. The PS is signed by the minister, agency head or institution concerned and serves as basis for project implementation, following its approval by the Minister of Finance and Chairman of the National Development Planning Board. Following approval of the PS, the first-tier officials supervising the project prepare the operational instructions (01) from the head of the department, agency or institution. The Project Officer is accountable for the financial and physical aspects of the project in accordance with the PS and 01.

The monitoring and evaluation system of the Department of Public Works is used for the supervision and control of development projects. The system consists of three components:

1. reports and evaluations concerning the financial progress of development projects
2. reports and evaluations concerning the physical progress of development projects
3. procedures for the identification of problems faced by projects and ways to solve them.

 8.3.    Accounting and Auditing System of Projects

8.3.1.    Accounting and Financial Reporting System

The accounting and financial reporting system for projects of the Department of Public Works, financed through the national budget, is governed by general procedures authorised by the Minister of Finance and Director General for the Budget.

The payment systems used by the Department of Public Works :

• direct payment using a Direct Payment Order charged to the national budget at the State Treasury and Cashier's Offices
• cash advances provided to treasurers for limited or small amounts of expenditure charged to the national budget at the State Treasury and Cashier's Offices
• direct payment using foreign loan funds at the Central Bank.

Corresponding to the above payment systems, the recording system is as follows :

• Payments made through Direct Payment Orders are considered as state expenditures and recorded directly in a given expenditure account in the expenditure budget.
• The recording of payments through cash advances to treasurers is similar to the system of recording petty cash by using a modified permanent fund system. Each expenditure is recorded in the general ledger as a temporary expenditure and after been accounted for by the State Treasury or Cashier's Office, the expenditure will be reimbursed up to the budget ceiling for the particular item and recorded as definite expenditure. Where it is considered necessary to raise the ceiling of cash advances to meet technical requirements, the Project Treasurer is entitled to obtain additional funds.
• Payments made by means of direct payments through an account in the central bank for changes in foreign funds, the project is only obliged to acknowledge, approve and submit evidence to the Central Bank, to record if in the ledger and monitor each expenditure made by the Central Bank to parties on behalf of the respective project. Based on the evidence of payment made by the Central Bank, the Pro-Officer or Project Treasurer records said expenditure in accordance with the corresponding budget item.

To record payments, projects maintain a cash advance account, general ledger and supporting accounts for project implementation activities. The recording of the value of assets owned or purchased or payments made, is based on historical value or the development value of a construction or the activity value. Where assets have ceased to be of any benefit or are considered in operational, they are written off from the inventory of state assets administered by the Department of Public Works.

In addition to purchasing and constructing building and other assets of its own, the Department of Public Works undertakes these functions on behalf of other departments and agencies. If the asset is completed and functioning as expected, utilisation and maintenance may be transferred to the department or agency concerned, provided that the transferee is prepared and capable of managing that particular asset.

The Project Officer examines, at least once a month, the books of account maintained by the Project Treasurer and prepares periodic financial and physical progress reports to be presented to the relevant directorate general of the Department of Public Works. Also, in compliance with the terms and obligations requested by the donor country or agency, the Project Officer prepares an annual report as evidence of his financial accountability. This report is audited by the Agency for Finance and Development Control, the internal control agency directly responsible for reporting to the President.

8.3.2.    Internal Control

Internal control comprises all organisational activities concerning the determination and evaluation of what has been achieved and how far implementation agrees with the plans and policies of management. Accordingly, the system of internal control implemented by the Department of Public Works focuses on :

• safeguarding the organisation's property
• securing accurate and reliable accounting information
• promoting operational efficiency
• fostering compliance with managerial policies.

In order to achieve these objectives, the Department of Public Works endeavours :

1. to separate the various functions of the organisation
2. to give full authority and responsibility to the directorates and heads of regional offices for the effective supervision and guidance of individual projects
3. to prepare weekly, monthly, quarterly, semester and annual reports, so that irregularities and weaknesses in implementation can be quickly identified and remedied
4. to monitor projects through computerised reports introduced in the Directorates General in the Department of Public Works
5. to carry out field inspections of work in progress in order to promote economic, efficient and effective methods
6. to ensure that project implementation is in accordance with plans and designs
7. to conduct co-ordination for the evaluation of performance, discussion of construction problems and planning for future activities.

The internal audit organisation in the Department of Public Works is headed by the Inspector General who has an on-going responsibility to monitor and report on the accounting and related operations of the Department of Public Works. Accordingly, officers of the Inspectorate General conduct internal audits to prevent, correct and follow-up problems.

9.    AUDIT OF THE DEPARTMENT OF PUBLIC WORKS

The audit of the Department of Public Works is within the mandate of BEPEKA (Supreme Audit Board of Indonesia), as set out in Article 23 of the 1945 Constitution and in the Act No. 5 of 1973 on BEPEKA.

The audit objectives of BEPEKA with respect to the activities of the Department of Public Works cover the programmes or sectors of development which are directly connected with the welfare of individual citizens and the public interest. These audit objectives are selected among others from problems set out in the Broad Outlines of State Policy and represent material for consideration in the Five Year Work Plan and the Annual Work Plan of BEPEKA.

The audits are, among others, directed towards the following objectives:

1. orderly execution of and compliance with existing laws and regulations
2. whether level of accomplishments and completion of activities are consonant with plans and objectives
3. meeting the specified procedures
4. using principles of economy in carrying out activities
5. benefits from the functioning of activities' results.

In carrying out its audit activities, BEPEKA follows audit procedures which are set out in Auditing Standards for the Audit of the Accountability of State Finance. These audit procedures are:

1. the preliminary audit, where data and information are collected to obtain indications of problems
2. on the basis of the preliminary audit, the preparation of an audit programme for implementation of a detailed audit
3. the detailed audit comprising more intensive examinations of indications already identified during the preliminary audit to ascertain irregularities and their causes.

The audit methodology involves the use of sampling methods in auditing the accountability of the auditee. Involved are financial reports, contracts and their supporting documents and physical checks in the field.

The audit of design and plan are aimed at ascertaining whether the work being done is supported by appropriate and accurate studies so that the work may be carried out in an economic, efficient and effective manner. These audits assess whether the design and plan:

1. are in accordance with the terms of reference
2. may be implemented without significant changes in supporting construction activities.

In determining the volume of work and cost involved for a particular undertaking, the Department of Public Works prepares relevant estimates, usually referred to as the Owner's Estimate. Audits of such estimates are aimed at ascertaining whether the work involved has been carried out at reasonable prices beneficial to the state.

Since the Owner's Estimate is prepared by the Department of Public Works, it serves as a reference for those seeking benchmark prices for tendering purposes. These audits assess whether estimates of:

1. cost of material, wages and equipment do not exceed standard prices or prices effective during that period
2. price components of work determined are reasonable.

The audit of contracts and payments assess whether:

1. the contracting parties have carried out their respective obligations
2. the rights of the contracting parties have been properly observed.

Audits of value for money are aimed at ascertaining whether money has been spent in economic, efficient and effective ways. Such audits assess:

1. the appropriateness of tendering procedures
2. the propriety of changes in the contract
3. the relevance of non-construction costs.

Audits of construction machinery, equipment and material are aimed at ascertaining whether the procurement procedures have been in the best interests of the project. Such audits assess whether procurement:

1. has been carried out economically
2. is in accordance with official requirements
3. supports and facilitates the construction work.

Government contractors are also subject to audit by BEPEKA. As elsewhere, the audit objectives are similar to those of auditing projects, viz.:

1. compliance with existing laws and regulations
2. physical progress of the proj ect
3. implementation of required procedures
4. adherence to economy in the use of resources
5. consideration of benefit factors.

9.2.7.    Role of Government Internal Audits

The audit reports of internal audit units of the government, regardless of whether the internal audits are conducted by the Agency of Finance and Development Control or by the Inspectors General, are submitted to BEPEKA. Such audit reports may be used for determining the external audit objectives of BEPEKA and used as a source of additional information to solve problems encountered during implementation of the external audit.

In auditing the activities of the Department of Public Works, auditors are expected to understand the physical environment of public works, in addition to professional auditing skills. Accordingly, the Bureau for Education and Training has conducted special programmes focusing on the auditing of public works, involving project construction, project management and project evaluation. Also, in order to increase the quality of audits of public works, BEPEKA has recruited engineers and architects.

The form and presentation of BEPEKA's audit reports are set out in the Auditing Standards for the Accountability of the Government. These audit reports are required to :

1. define the scope of the audit
2. report concisely and clearly
3. present data accurately, completely and fairly
4. state opinions and conclusions clearly
5. support objective evidence
6. contain the auditor's recommendations
7. use constructive comments
8. identify problems that require further discussions
9. acknowledge past performance and corrective action taken
10. include views of responsible officials.

The audit report is presented initially to the Department of Public Works to be discussed for any follow-up action. The final reports is then incorporated with other audit reports in the Annual Audit Report or the Semester Audit Report to be presented to the House of People's Representatives (Parliament).

Physical examinations aim at assessing and testing the appropriateness of work performed under the terms specified, both qualitatively and quantitatively. However, in conducting physical examinations, BEPEKA's auditors still lack the required knowledge of public works, including:

The capability to understand construction drawings is essential in conducting physical examinations in order to assess whether the work performed is in accordance with plans.

The capability to understand technical reports of work performed is intended to assess whether the volume of work performed is in accordance with that reported for payment. In order to understand technical reports, the auditors must be able to make or test relevant mathematical calculations.

The availability of test equipment is of prime importance in conducting physical examinations, whether to assess the appropriateness of quality or to test the correctness of the volume of work performed. Such testing requires laboratory facilities in order to assess whether work failed to meet prescribed specifications. Laboratory testing of this nature is normally conducted during work implementation, but audits by BEPEKA are generally post-audits. Accordingly, the auditors perform only post-certificated tests, which tend to be unreliable since most of them are conducted by the auditee, i.e. the Department of Public Works.

In order to obtain complete and comprehensive results, a relatively long period is required in order to carry out an extensive audit of public works. However, auditors of public works have only limited time, so that work subjected to audit examination is also quite limited.

Difficulties faced in auditing public works are generally in the field of technical engineering knowledge, as most of BEPEKA's auditors have non-engineering educational backgrounds. So far, if it is necessary, BEPEKA can employ or hire experts from outside.